Remy Cointreau’s Champagne business has been marginalised by the global recession and the group would rather be pouring Cognac for China.

Remy Cointreau embodies two key drinks trends that have emerged alongside the global economic downturn. The first is that Champagne has taken a battering; the retreating economic tide exposing the cracks in the least profitable of the sector’s businesses.

The second trend, inextricably linked with China’s resilience, is the explosion in growth for high-end Cognac in Asia. Both of these factors have combined to persuade Remy Cointreau that its Piper-Heidsieck and Charles Heidsieck Champagne brands and assets are not worth holding on to.

Champagne made losses of EUR4m (US$5.4m) in Remy’s last fiscal year, to the end of March, and only accounted for around 12% of group net sales. Although sales rebounded by 16% in the first half of Remy’s new year, this was not enough to claw back a drop of 42% in the same period of 2009.

By contrast, Cognac sales rose by 20% in the six months to the end of September. Last year, Cognac accounted for 50% of the group’s sales as China’s thirst for premium Remy Martin made the country Remy Cointreau’s premier sales market for the first time. The Cognac division’s operating profits rose by 38% for the year, to EUR106m.

It’s not only Cognac that is outperforming Champagne at Remy Cointreau. The firm said that Cointreau, Passoa and Mount Gay Rum all increased sales in the last fiscal year. Even though profits from the spirits and liqueurs business slipped by 7%, earnings came in at EUR51.6m, still a significant contribution versus Champagne.
 
No surprise, then, that Remy told just-drinks today that it wants to use proceeds from the Champagne sale to bolster Cognac in Asia and increase investment behind its spirits and liqueurs business. Champagne, it said, “is not profitable enough”.

How well do you really know your competitors?

Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.

Company Profile – free sample

Thank you!

Your download email will arrive shortly

Not ready to buy yet? Download a free sample

We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form

By GlobalData
Visit our Privacy Policy for more information about our services, how we may use, process and share your personal data, including information of your rights in respect of your personal data and how you can unsubscribe from future marketing communications. Our services are intended for corporate subscribers and you warrant that the email address submitted is your corporate email address.

One analyst said earlier this year that Remy’s Champagne arm “lacks brand equity”. It would certainly not be a giant leap for anyone interested in acquiring the division. Analysts think the business could fetch around EUR200m.
 
As for who might be interested, Evolution Securities analyst Simon Hales told just-drinks today that he “would not rule anyone out”. He said that most big players, as well as private equity, would likely run the numbers over Piper-Heidsieck and Charles Heidsieck as a potential “bolt-on” acquisition.

Diageo has made no secret of its desire to expand in Champagne, beyond its 34% stake in Moet Hennessy. It is thought that the group could obtain an exemption from Moet’s owner, LVMH, to move for Remy’s Champagne business. However, just-drinks understands that Diageo is not seriously considering a bid.

With Diageo out, the spotlight may fall on Pernod Ricard and Bacardi. Pernod Ricard is focused on deleveraging, but it would not be a huge stretch for a group of its size. Bacardi is believed to have the funds, but does not have a lot of history with sparkling wine brands. Private equity groups could emerge as frontrunners, with a view to selling the Champagne assets on in a few years’ time.  

A deal will also depend on Remy’s valuation and determination to sell. Remy is attempting to push up the potential price-tag by commissioning the Credit Agricole bank to organise a bidding process. In 2004, the group is thought to have called off the sale of its Champagne business due to below-par offers.

This time around, the group looks to have a more compelling reason to sell. How quickly, at what price and who to remain uncertain.

Stay informed for just £1! *

Get access to unbiased and data-driven news with a subscription to Just Drinks.

What’s included in your subscription:

  • Unlimited access to Just Drinks content including daily global news, in-depth analysis, and interviews with C-suite executives
  • Unbeatable coverage of categories from beer, wine and spirits to soft drinks and hot
    beverages
  • Unrivalled drinks industry comment from Dean Best, Jessica Broadbent and leading sector specialists

Have a Subscribtion Sign in

Get help with subscribing or signing in

*30-day digital subscription for £1. Available to new subscribers only